What’s Going On With the Estate Tax?



Remember back in December when there was all that talk about the fiscal cliff?  Since that headline was so quickly replaced with debt ceiling concerns, and followed most recently by the sequestration issues (who comes up with these terms???) you might have already forgotten about the fiscal cliff.

As esteemed Georgia State College of Law professor Samuel Donaldson put it during a recent Atlanta Estate Planning Council talk where I was a guest, we did like Wile E. Coyote, running off the cliff and hovering in the air for a few seconds.  However, unlike Wiley, we turned around and made it safely back onto the cliff before plunging to our demise (okay, maybe that is a little dramatic).

For estate planning purposes, this means that Congress implemented a permanent (that is, until Congress changes it) unified Gift and Estate Tax Exemption of $5 million for each individual, indexed for inflation.  This means that as of 2013, an individual can transfer up to $5,250,000 million during life or at death before being subject to gift or estate tax.

As I tell many clients, most of us are not lucky enough to have an estate tax problem.  For those who are, many options still exist, which may include:

1.   Use of Family Limited Partnerships and other Family-Owned Business Entities to distribute wealth

2.   Acquisition of Life Insurance (and use of Life Insurance Trusts) to cover potential estate tax liability

3.  Sales to Grantor Trusts

4.  Use of Grantor Retained Annuity Trusts

5.  Use of Credit Shelter Trusts

6.  Charitable Bequests

7.  Transferring the home to a Qualified Personal Residence Trust

8.   Making annual gifts under the Annual Exclusion amount ($14,000 in 2013)

As you can see (and although this might as well be in Greek to many) there are a number of options available to reduce the hit.  If you are lucky enough to have an estate tax problem but have not completed an estate plan, call your attorney today!

CAVEAT:  This web site and the information contained herein have been prepared for educational purposes only.  The information on this blog does not constitute legal advice, which would be dependent upon the specific circumstances of a particular case.  In addition, because the law can vary from state to state some information on this site may not be applicable to you.

Image © Valerie Potapova – Fotolia.com


About Sarah R. Watchko, Esq.

Sarah R. Watchko is an attorney practicing estate planning and elder law in Atlanta, Georgia


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